Polyurea Garage Floor - expense or improvement

[David V.]

Quick question to the Tax pros out there.  I am considering resurficing my rental garage floor with Plyurea and was wondering if this can be expensed or is this an improvement that needs to be depreciated?  I suspect even if it is an improvement I could likely expense it under the Deminimis Safe Harbor if under 2.5K anyway?   With this said, I would never do this for a rental so this is a rental (tenant moved out) that I plan on selling using a 1031 exchange on soon and the garage floor has lots of cracks and stains so I want to make the floor look nicer.  Regards dave

[Jason Malabute]

If you’re resurfacing your rental property’s garage floor, the key question is whether this counts as a repair or an improvement. The IRS defines a repair as something that keeps your property in good working condition without significantly adding value or extending its life. These are typically deductible in the year they’re done.

On the other hand, improvements that better the property, restore it after substantial damage, or adapt it for a new use generally have to be capitalized and depreciated over time.

Now, if the cost is $2,500 or less, you might be able to use the De Minimis Safe Harbor election to expense it immediately, rather than depreciating it. Just make sure you have a consistent policy for expensing items under this threshold, as the IRS looks for that consistency.

In your case, if the Polyurea flooring is just making the garage look nicer and not really improving the structure or extending its life, you could argue it’s a repair. But if it’s more substantial, like protecting the floor and adding years to its lifespan, then it’s likely an improvement, which means you’d need to capitalize it unless you can use that safe harbor.